Lawmakers are hoping to pass a bill that seeks to stop Britain from leaving the European Union on Oct. 31 with no agreement. Market analysts said the only way to break the Brexit deadlock would be to hold an election once the no-deal bill becomes law.

"We now expect Britain to avoid a disastrous no-deal Brexit, but an election is looking like an increasing likelihood in the near future," said Morten Lund, a currency strategist at Nordea Markets.

Against the dollar, the pound fell 0.3% to $1.2211, after jumping 1.4% on Wednesday, when Parliament paved the way for requiring Prime Minister Boris to seek a three-month extension to the Brexit deadline, if he can't renegotiate a  transition deal by the middle of October.

Against the euro, the British currency edged 0.2% lower at 90.25 pence.

Sterling volatility gauges also eased further. Two-month implied vol, a contract capturing the Oct. 31 Brexit deadline, fell from three-year highs reached on Tuesday

Opposition Labour party leader Jeremy Corbyn said he would agree to hold an early election once the bill became law, which  could happen on Monday. He did not, however, say whether he agreed with Johnson's choice of date.